On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Before Judges Shebell, D'Annunzio and Coburn.
The opinion of the court was delivered by: Coburn, J.A.D.
Argued November 13, 1997 -
This is an action by plaintiff mortgage company against a firm and its principal, collectively referred to as defendant, engaged in the business of providing appraisals of the value of real property. Plaintiff appeals from a summary judgment entered on the ground that the entire controversy doctrine precludes this claim, and on the alternative ground that the claim is barred by the six-year statute of limitations. We reverse and remand for trial.
There is no dispute regarding any material fact. In 1988, plaintiff retained defendant to appraise certain property in Jersey City in connection with a mortgage loan application filed with the plaintiff by Edwin Nazario. Defendant appraised the property at a value of $280,000, and on the strength of that appraisal plaintiff loaned Nazario $182,000. The loan closed in 1988. Nazario defaulted in 1989. In 1990, plaintiff commenced an action to foreclose Nazario's mortgage and judgment was entered in that action in 1992.
Plaintiff was aware as early as 1991 that defendant's appraisal may have been defective. Plaintiff received an appraisal from Ebert Appraisal Company dated December 10, 1991, indicating that the property's value was $209,000, i.e., $71,000 less than defendant had reported it in 1988. An Ebert appraisal dated June 15, 1993 reported the value as $192,000, and another Ebert appraisal on February 14, 1994, reported it as $132,500. An appraisal by the Smith firm dated September 16, 1994 indicated the appraised value to be $75,000. In September 1994, plaintiff, through its assignee, acquired possession of the Nazario property.
The trial court believed the entire controversy doctrine was implicated in this case because of another transaction between the parties relating to Trevor Willis. In 1989, Willis applied to plaintiff for a mortgage loan on property in Montclair. Plaintiff retained defendant to appraise the Montclair property and defendant valued it at $511,000. In reliance on this appraisal, plaintiff approved and closed a loan to Willis in the amount of $367,700 in July 1989. By June 1991, the Willis loan was in default.
On July 29, 1992, plaintiff sued defendant, alleging negligence with regard to the Willis appraisal. In its complaint in the Willis action, plaintiff alleged that the value of the Willis property at the time of the appraisal was no higher than $290,000. Thus, the action against defendant arising out of the Willis appraisal was pending at the time plaintiff was aware of facts suggesting that the Nazario appraisal was incorrect.
On June 13, 1995, ten months after plaintiff took possession of the Nazario property, plaintiff and defendant settled the action pertaining to the Willis appraisal. Approximately ten weeks later, on August 22, 1995, plaintiff commenced the present action against defendant arising out of the Nazario appraisal.
The entire controversy doctrine evolved through common law to encompass a mandatory rule "for the joinder of virtually all causes, claims, and defenses relating to a controversy between the parties engaged in litigation." Cogdell v. Hospital Ctr., 116 N.J. 7, 16 (1989). The failure to adhere to the requirements of mandatory joinder precludes a party in a subsequent lawsuit from asserting a new and independent action for damages. Thus, the general rule in New Jersey is "a defendant must assert all matters which will defeat a claim against him and a plaintiff must seek complete relief for vindication of the wrong he charges." Applestein v. United Bd. & Carton Corp., 35 N.J. 343, 356 (1961); Mori v. Hartz Mountain Dev. Corp., 193 N.J. Super. 47, 53 (App. Div. 1983); see Falcone v. Middlesex County Med. Soc'y, 47 N.J. 92, 93 (1966); Massari v. Einsiedler, 6 N.J. 303 (1951).
"[T]he entire controversy doctrine applies not only to matters actually litigated, but to all aspects of a controversy that might have been thus litigated and determined." Mori, supra, 193 N.J. Super. at 56. Consequently, the application of the doctrine requires that a party who has elected to hold back from the first proceeding a related component of the controversy be barred from thereafter raising it in a subsequent proceeding. It is only that bar which can effectively prevent the evil of " * * * piecemeal litigation of fragments of a single controversy." [Wm. Blanchard Co. v. Beach Concrete Co., 150 N.J. Super. 277, 292-93 (App. Div.) (citations omitted), certif. denied, 75 N.J. 528 (1977).]
The doctrine is now codified in R. 4:30A, which provides:
"Non-joinder of claims or parties required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine, except as otherwise provided by R. 4:64-5 (foreclosure actions) and R. 4:67-4(a)(leave required for counterclaims or cross-claims in summary actions)."
R. 4:27 provides in pertinent part, "Subject to R. 4:30A (entire controversy doctrine), the plaintiff in the complaint . . . may join . . . as independent . . . claims . . . as many claims, either legal or equitable or both, as he or she may have against an opposing party." The rule is clearly permissive unless the entire controversy doctrine dictates otherwise. The entire controversy doctrine is not implicated here because ...